In the NYT, you’ll see the eminently reasonable and decent Tyler Cowen explain, “The New Deal Didn’t Always Work, Either.” It’s a good thing nobody’s arguing that, then, isn’t it? Here’s a few quick points.
(1) As Tyler points out, and as I say in my book, the New Deal featured some notable errors. Everyone’s favorite to hate is the National Recovery Administration, which (as Tyler puts it) “sought to cartelize industry, backed by force of law.” Even if it had functioned it would probably have ended up increasing both prices and wages, leaving no net improvement in purchasing power; in the event, it didn’t function. It was unpopular with the public and Congress, tasked with investigating itself, discredited and almost discarded by the time the Supreme Court declared it unconstitutional.1
Here’s the point to note: I’ve seen nobody argue, nor does Tyler cite anyone arguing, that, as a historical matter, NRA was the New Deal’s big success, nor that as a lesson of history, we should try NRA again.
(2) As Tyler points out, and as you’ve read here, “New Deal fiscal policy didn’t do much to promote recovery.” Just so: which is what Keynes was explaining, what Krugman argues, and what has been the understanding of the subject since E. Cary Brown’s work back in the 1950s: the lesson of New Deal fiscal policy is that Roosevelt was too conservative about its use.
When Tyler says, “we shouldn’t think that fighting a war is the way to restore economic health”—well, good thing nobody sane thinks that. The point of Michael Cembalest’s graph is not “war good” but “fiscal stimulus good”—you can have fiscal stimulus without war, and indeed fiscal stimulus is much more effective—and also morally defensible, we should note—without killing off your young and productive workers.
Here’s the point to note: I’ve seen nobody argue, nor does Tyler cite anyone arguing, either that we should repeat note-for-note the New Deal’s use of fiscal policy or that we should wage a war because it will allow less restrained fiscal policy. The point is that we should learn the lessons of New Deal fiscal policy and not be as conservative as FDR was in the 1930s.
(3) Tyler says, “The good New Deal policies, like constructing a basic social safety net, made sense on their own terms and would have been desirable in the boom years of the 1920s as well.” Absolutely right. Indeed, we can go further: they would have been desirable in the late nineteenth century, when other countries were enacting such policies, and they would have been desirable in the early twentieth century, when Theodore Roosevelt and Woodrow Wilson saw some early such measures into law over the objections of conservatives. And, as Tyler says, they would have been desirable in the 1920s. Funnily enough, the party in power in the 1920s was the non-TR version of the Republican Party, which had no interest in such policies. Inasmuch as these policies had been desirable for decades and blocked by political opposition, it was eminently sensible for the New Deal Democrats to enact them in the 1930s, because who knew when there would again be a majority in favor of them.
Here’s the point: Tyler thinks such policies are good, universal healthcare is probably one of them; it would be eminently sensible for the Obama Democrats to enact it now, because who knows when there will again be a majority in favor of it.
I’m pleased to join forces with Tyler against the wicked NRA-revivalists when they show up, and against the now actually existing opposition on the right, who would fight against these clear conclusions.
1The standard work on NRA is Hawley, The New Deal and the Problem of Monopoly, which lays out the case I’ve given here; even newer work such as the excellent Meg Jacobs, Pocketbook Politics, which emphasizes some of the useful, non-cartel aspects of NRA, acknowledges these core problems.
shadowcook made me read this.